ANALISIS BIAYA

Semester Gasal TA 2016 2017

Process Costing

Product Costing Procedures in

Organizations

Product Costing Procedures in

Organizations
Process
Costing

Job-order
Costing

Typical process cost applications:

Petrochemical refinery
Paint manufacturer
Paper mill

Objectives of Process Costing

To determine how manufacturing costs be

allocated to units completed, or to units

started but not completed.
Also to compute total unit costs for income
determination.

Basic Features
Process costing - a cost accumulation

system appropriate when products are

manufactured through a continuous
process.
Each dept/cost center, prepares a cost of
production report/ performance report

Characteristics
Costs accumulated by dept, or cost center.
Each dept has its own WIP A/C. debited: when costs

incurred. credited: when units complete/transferred to

next dept.
Equivalent units (EU) are partially completed units
restated in terms of completed units
Unit costs determined by dept/cost center.
As units & costs leave each dept, the units & costs are
carried over to the next dept; when units & costs leave
the last dept, they can be used to determine the unit
cost of FG.
Departmental cost of production reports / performance
reports

Process System - Example

An Operational Process System

Comparison of Cost Accumulation

Methods

Comparison of Cost Accumulation

Methods

Flow of Manufacturing Costs

Direct Materials, Direct Labor,
Indirect Manufacturing Costs

Department
A

Department
B

Finished Goods

Cost of Goods Sold

Flow of Manufacturing Costs

Costs accumulated by dept, or cost center
Each dept has its own WIP A/C. debited:

when costs incurred. credited: when units

complete / transferred to next dept.
As units & costs leave each dept, the units

& costs are carried over to the next dept;

when units & costs leave the last dept, they
can be used to determine the unit cost of
FG.

Flow of Manufacturing Costs Example

Equivalent Units

Equivalent units (EU) are partially

completed units restated in terms
of completed units

Equivalent Units
Two
Twoone-half
one-half completed
completed products
products are
are
equivalent
equivalentto
toone
onecompleted
completedproduct.
product.

So,
So, 8,000
8,000 units
units70
70percent
percent complete
complete
are
areequivalent
equivalentto
to5,600
5,600complete
completeunits.
units.

Equivalent Units - Example

ACE started June with 250 partially completed

units in work-in-process (30% complete).

During June, ACE completed the units in work-inprocess and started an additional 1,200 units.
There were 300 units in ending work-in-process on
June 30. They were 40% complete.
How many total equivalent units did ACE produce

during June?

Continue

Equivalent Units - Example

W ork to comple te
be ginning w ork-in-proce ss
W ork on units sta rte d a nd
comple te d
W ork on e nding w ork-inproce ss
Tota l e quiva le nt units

units

% of w ork
done this
pe riod

250

70%

175

900

100%

900

300

40%

120

Equiva le nt
units

Since
Since 30%
30% of
of the
the work
work was
wasdone
done on
on these
these
units
units in
inMay,
May,the
theremaining
remaining70%
70%of
ofthe
thework
work
isis done
done in
inJune.
June.

1,195

Equivalent Units - Example

Work to complete
be ginning w ork-in-proce ss
Work on units sta rte d and
comple te d
Work on e nding w ork-inproce ss
Tota l equiva le nt units

units

% of w ork
done this
period

250

70%

175

900

100%

900

300

40%

120

Equivale nt
units

1,195

Since
Since 1,200
1,200 units
units were
were started
started during
during June,
June, and
and 300
300
of
of
those
those units
units are
are still
still in
in work-in-process
work-in-process on
on June
June 30,
30,
900
900 units
units were
were started
started and
and completed
completed during
during June.
June.

Equivalent Units - Example

Work to complete
beginning work-in-process
Work on units started and
completed
Work on ending work-inprocess
Total equivalent units

units

% of work
done this
period

250

70%

175

900

100%

900

300

40%

120

Equivalent
units

1,195

40%
40% of
of the
the work
work was
was done
done on
on these
these units
units in
in
June.
June.

Calculating and Using Equivalent

Units of Production
To calculate the cost per
equivalent unit for the period:

Cost per
equivalent
unit

Costs for the period

Equivalent units for the period

Equivalent Units of Production

Weighted-Average Method
The weighted-average method . . .
Makes no distinction between work done in
the prior period and work done in the current
period.
Blends together units and costs from the
prior period and the current period.

The FIFO method is a more

complex method and is
rarely used in practice.
1-20

Five Steps in Process Costing

Step 1: Summarize the flow of physical units of
output.
Step 2: Compute output in terms of equivalent units.
Step 3: Compute equivalent unit costs.
Step 4: Summarize total costs to account for.
Step 5: Assign total costs to units completed and to
units in ending work in process inventory.

Apply process-costing methods

to cases without beginning WIP.

Physical Units (Step 1)

Physical units
Flow of Production
Work in process, beginning
0
Started during current period
35,000
To account for
35,000
Completed and transferred out
during current period
30,000
Work in process, ending (100%/20%)
5,000
Accounted for
35,000

Compute Equivalent Units (Step 2)

Equivalent units

Flow of Production
Completed and
transferred out
Work in process,
ending
Current period work

Direct
Materials
30,000
(100%
5,000 )
35,000

Conversion
Costs
30,00
0
1,000 (20%)
31,00
0

Note:
With non uniform application of productive
inputs

Compute Equivalent Unit Costs

(Step 3)
Total production costs are $146,050
Direct
Conversion
Materials
Costs
Equivalent units
Cost per equivalent unit

$84,050

$62,000

35,000
$2.4014

31,000
$2.00

Summarize and Assign Total Costs

(Steps 4 and 5)
Step 4: Total costs to account for: $146,050
Step 5: Assign total costs:
Completed and transferred out
30,000 $4.4014
$132,043
Work in process, ending (5,000
units)
Direct materials 5,000 X
12,007
$2.4014
Conversion costs 1,000
2,000
$2.00
Total
$146,050

Flow of Costs Example

Accounts Payable
84,050

Various Accounts
62,000

WIP Assembly
84,050 132,043
62,000
14,007
WIP Finishing
132,043

Apply process-costing methods

to cases with beginning WIP.

Physical Units (Step 1)

Work in process, beginning:
100% material, 60% conversion
costs
Units started in process

35,000

Units transferred out:

31,000

Units in ending inventory:

100% material, 20% conversion
costs

1,000

5,000

36,00
0

36,00
0

Compute Equivalent Units (Step 2)

Materials Conversion
Completed and transferred 31,000
31,000
Ending inventory
5,000
1,000
Equivalent units
36,000
32,000

100%

20%

Compute Equivalent Unit Costs

(Step 3)

Materials
Conversion
Beginning inventory $ 2,350
$ 5,200
Current costs
84,050
62,000
Total
$86,400
$67,200
Equivalent units
36,000
32,000
Cost per unit
$2.40
$2.10

Summarize and Assign Total Costs

(Steps 4 and 5)
Work in process beginning inventory:
Materials
$ 2,350
Conversion
5,200
Total beginning inventory
$ 7,550
Current costs in Assembly Department:
Materials
$ 84,050
Conversion
62,000
Costs to account for

$153,600

Summarize and Assign Total Costs

(Steps 4 and 5)

This step distributes the departments costs to units

transferred out:
31,000 units $4.50 = $139,500
And to units in ending work in process inventory:
$12,000 + $2,100 = $14,100

Summarize and Assign Total Costs

(Steps 4 and 5)

Costs transferred out:

31,000 ($2.40 + $2.10)

$139,500

Costs in ending inventory:

Materials
5,000 $2.40
Conversion 1,000 $2.10

12,000
2,100

Total costs accounted for:

$153,600

Key T-Account: WeightedAverage

Work in Process Inventory, Assembly
Beg. Inv.
7,550
Transferred
Materials
84,050
to Finishing
Conversion62,000
139,500
Balance
14,100

Apply process-costing methods

to cases with transferred-in costs.

Transferred-In Costs
Weighted-Average Example

Finishing Department beginning WIP inventory:

4,000 units (60% materials) (25% conversion)
Ending work in process inventory:
2,000 units (100% materials) (40%) conversion)
31,000 units transferred-in from Assembly.

Physical Units (Step 1)

Beginning inventory
Units started in process
Units completed and transferred
to finished goods
Ending inventory

4,000
31,000
35,000
33,000
2,000
35,000

Compute Equivalent Units

(Step 2)
Equivalent units for transferred-in costs:
Transferred to finished goods
Ending inventory

33,000
2,000
35,000

Inventory is 100% complete for the work

performed in the Assembly Department.

Compute Equivalent Units

(Step 2)
Equivalent units for direct materials costs:
Transferred to finished goods
33,000
Ending inventory (100%)
2,000
35,000

Compute Equivalent Units

(Step 2)
Equivalent units for conversion costs
(ending inventory 2,000):
Transferred to finished goods 33,000
Ending inventory (40%)
800
33,800

Compute Equivalent Unit Costs

(Step 3)

Assume the following costs in the

Finishing Department:
Work in process beginning inventory from:
Assembly Department
$30,200
Direct materials
9,400
Conversion costs
8,000
Total cost in beginning inventory
$47,600

Compute Equivalent Unit Costs

(Step 3)

Current costs in Finishing Department

are as follows:
Costs received from the
Assembly Department
Direct materials
Conversion
Total

$139,500
9,780
42,640
$191,920

Compute Equivalent Unit Costs

(Step 3)
(Transferred-in costs $30,200 + Costs transferred
in from the Assembly Department $139,500)
35,000 units
$4.85
(Direct materials $9,400 + $9,780)
35,000 units

$0.55

(Conversion costs $8,000 + $42,640)

33,800 units

$1.50

Total unit cost

$6.90

Summarize and Assign Total Costs

(Steps 4 and 5)

Total costs in beginning inventory

Current costs in Finishing Department

$ 47,600
191,920
$239,520

Costs to account for: $47,600 + $ 191,920 =

$239,520

Summarize and Assign Total Costs

(Steps 4 and 5)

Costs in work in process ending inventory:

Transferred-in costs: 2,000 $4.85

$ 9,700

Direct materials: 2,000 $0.55

1,100

Conversion: 2,000 40% $1.50

1,200

Total cost in ending inventory

$12,000

Summarize and Assign Total Costs

(Steps 4 and 5)
Costs to account for:

$239,520

Costs transferred to finished goods inventory:

33,000 $6.90
$227,700
Costs in ending work in process inventory:
$12,000 $180 rounding error
Total

11,820

$239,520